The American Rescue Plan Act Provides for Fully Subsidized COBRA Coverage


On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”) in response to the COVID-19 pandemic.  The ARPA includes numerous provisions that impact employers including extending FFCRA leave (see prior blog post here) and providing fully subsidized COBRA coverage for eligible individuals.  This blog focuses on COBRA subsidies. 

Generally, COBRA allows certain people to extend employment-based group health coverage if he/she would lose coverage due to certain life events (i.e., involuntary loss of a job). The ARPA provides temporary premium assistance for such coverage to Assistance Eligible Individuals (“AEI”).  This means that AEI will receive 100% premium assistance for periods of coverage from April 1, 2021 through September 31, 2021.

Who qualifies as an Assistance Eligible Individual?  An AEI is a COBRA qualified beneficiary who meets the following requirements from April 1, 2021 through September 30, 2021: (1) is eligible for COBRA coverage by reason of a qualifying event; and (2) Elects COBRA Continuation Coverage.  AEI’s are entitled to 100% coverage of their COBRA premiums (including administrative costs) for all eligible periods between April 1, 2021 through September 31, 2021.  This means if an individual currently has COBRA coverage and would have it available through August 31, 2021, this individual’s premiums are 100% covered from April 1, 2021 through August 31, 2021. ARPA does NOT extend the amount of time an individual is eligible for COBRA coverage.  For example, the previously described individual would not be entitled to an extra month of COBRA coverage simply because the subsidy period extends through September 30, 2021.  

There is another group of individuals who may benefit from COBRA premium assistance under the ARPA—those are Extended Qualified Beneficiaries. EQB are individuals who are not currently AEI’s because they either failed to elect COBRA coverage or stopped paying premiums.  EQB have a second shot at electing COBRA coverage and thus benefiting from the subsidy.  Employers must provide notices to EQB of this benefit no later than May 31, 2021.  A model notice can be found at this link: https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/cobra/premium-subsidy/model-extended-election-periods-notice.pdf). 

Employers will recover the subsidized premiums through a refundable payroll tax credit like the way in which employers will recover/have recovered mandatory paid leave costs under the FFCRA.

What should employers do now?  Employers need to gather information about individuals who were involuntarily terminated (or had a reduction in hours) and either elected, or were eligible to elect, COBRA coverage within the 18 months prior to April 1, 2021. This information will be important to narrow down the list of individuals who the employer needs to send Notices to of the extended election period.  The employer must send Notices to eligible individuals no later than May 31, 2021.

Employers also need to update their COBRA notices no later than May 31, 2021 to include information on the availability of the subsidy.   Again, sample notices can be found at this link: https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/cobra/premium-subsidy/model-extended-election-periods-notice.pdf.

For additional information, please see the FAQ’s issued by the DOL that can be found at this link:  https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-premium-assistance-under-arp.pdf or contact Natalie Clouse at nclouse@bradleyriley.com.

Natalie K. Clouse
Civil Litigation